Nishikawa Rubber Co., Ltd. Business Report FY2010

Business Highlights

Financial Overview

(in millions of JPY)

FY2010

FY2009

Rate ofchange(%)

Factor

Overall

Sales

52,019

46,938

10.8

Overall sales increased from the previous year’s result thanks to the following factors: - The Automotive Parts Division, the Company’s major business, developed and increased sales of environmentally friendly products such as lightweight, door inner weather strips. - Sales grew in the strong Asian market.

Operating income

4,775

3,573

33.6

-

Ordinary income

5,453

4,120

32.4

-

Net income

3,828

4,069

(5.9)

-

Automotive parts division

Sales

47,811

43,446

10.0

- Sales at the Automotive Parts Division increased larger than the market growth rate thanks to strong sales of new products

Operating income

4,281

3,315

29.1

-Operating income increased as a result of the Company's initiatives to reduce costs.

Business Restructuring

- The Company announced on March 10 that it will strengthen collaborative relationships with a U.S. supplier Cooper-Standard Automotive Inc. (CSA) in the business of rubber sealing for automobiles with an aim to expand and streamline its operations in the global market. Nishikawa will raise its stake in Nishikawa Standard Company LLC, a fifty-fifty joint venture company in the U.S. between Nishikawa of America, Inc. and CSA, by 10 percent to 60 percent to transform the joint venture to Nishikawa’s consolidated subsidiary. The hike in equity is meant not only to further extend and strengthen the U.S. operations, but also to establish a strong foothold in the U.S. under the strategy for global expansion. The U.S. subsidiary will change its company name to Nishikawa Cooper LLC when it becomes the consolidated subsidiary. In Thailand, a 20 percent stake in Nishikawa Rubber’s local corporation Nishikawa Tachaplalert Rubber Co., Ltd. will be transferred to CSA in an attempt to build a broader alliance of the group as a whole. The company name will also be changed to Nishikawa Tachaplalert Cooper.Ltd. Nishikawa Rubber will acquire a stake in CSA’s subsidiary in Poland, Cooper Standard Automotive Polska. Nishikawa and CSA also agreed to reorganize the capital structure of their joint venture “Cooper Standard Automotive Mexico. Details of operations in Poland and Mexico have yet to be announced. (From an article in the Nikkan Jidosha Shimbun on March 11, 2011)

R&D

R&D Expenditure

(in millions of JPY)

FY2010

FY2009

FY2008

Automotive parts

149

162

106

R&D Activities

1) Development of technology to make lighter products- Automakers are demanding lighter weight products in order to improve fuel consumption. To respond to such requests, the Company is working reduce the weight of its seals by using resin and utilizing better foaming technology.- The Company developed and commercialized one of the world's lightest door inner seals by use of microcell foam technology and ultra-thin insert metal. The new product offers a 25 percent reduction in mass ratio compared with the Company's former products.

2) Development of technology to reduce noise- The Company is applying its technology in the area of foaming to further reduce the noise levels in its existing products. It is also developing improved noise-insulating products.

3) Development of technology to comply with environmental needs- The Company has continued development of energy-saving production method to manufacture sealing materials, next-generation sealing materials for electric cars and other environmentally friendly vehicles, and materials using plant-derived substances.

Investment Activities

Capital Expenditure

(in millions of JPY)

FY2010

FY2009

FY2008

Overall

2,324

2,091

5,493

- The Company announced that will establish a new company in Korea to manufacture packing seals and sealing products for automobile interiors. The Company is investing 700 million won (approximately 51 million yen) in the project, which will represent its first foray into the Korean market. Production operations are scheduled to begin in April this year, which will allow the company to partly transfer production of products for the local plants of Japanese auto parts suppliers from Japan to Korea, responding to the customers' requirements. The new company, Nishikawa Bussan Korea Inc, will be formed as a subsidiary of Nishikawa Bussan (Nishikawa Rubber's subsidiary) in March 2011. It will be located in Kimhae City, South Gyeongsang Province to manufacture and sell automotive seals and packing products as well as rubber and plastics for construction use. Mr. Mitsuaki Sawamoto, now an Executive Managing Director of Nishikawa Bussan, will assume the presidency of the new company. (From an article in the Nikkan Jidosha Shimbun on February 12, 2011)

New Equipment Installations

Plant

Equipment to be introduced

Estimated amount of investment(million JPY)

Project Period

From

To

Nishikawa Rubber

Shiraki Plant(Hiroshima, Japan)

-Manufacturing equipment for automotive seals-Components for general industry

297

Dec.2010

Mar.2012

Asa Plant(Hiroshima, Japan)

-Manufacturing equipment for automotive seals-Components for general industry

-Manufacturing equipment for automotive seals-Components for general industry

55

Jan.2011

Mar.2012

Nishikawa Big Ocean Co., Ltd.(Hiroshima, Japan)

-Manufacturing equipment for automotive seals

108

Jan.2011

Mar.2012

Nishikawa Rubber Yamaguchi(Yamaguchi, Japan)

-Manufacturing equipment for automotive seals

175

Mar.2011

Mar.2012

Nishikawa Big Well Co., Ltd.(Hiroshima, Japan)

-Manufacturing equipment for automotive seals

68

Mar.2011

Mar.2012

Overseas subsidiaries

Nishikawa Cooper LLC.

-Manufacturing equipment for automotive seals

773

Dec.2010

Dec.2011

Nishikawa Tachaplalert Rubber Co., Ltd.(Thailand)

-Manufacturing equipment for automotive seals

991

Dec.2010

Dec.2011

Shanghai Nishikawa Sealing System Co., Ltd. (Shanghai, China)

-Manufacturing equipment for automotive seals

502

Dec.2010

Dec.2011

*Most of the domestic investments were for renewing or rationalizing facilities for new product launches, and generated no significant improvement in the Company's production capacity.*Investments in overseas subsidiaries were made to respond to more orders.